How NOT to become a financial burden

Shore up your plans for retirement now so your family won't have to take on your debts later.

In the wake of the economic recession, the value of John and Mary Bouska's home in Cottage Grove, Minnesota, dropped a whopping 30 percent. "For middle-class families like ours, a home is like a savings account. So a significant decrease in value can be problematic," says John, 62. "But I'm confident that with the plans we've made, we will not be a financial burden on our family."

When it comes to coping with shrinking home values, the Bouskas aren't alone. But according to Barbara Delaney, principal at StoneStreet Equity, LLC, in Pearl River, New York, not everyone is as certain that they won't become a burden on their families as they age.

"People were planning to have more capital in real estate, and senior living expenses are going up at a faster rate than the housing market," Delaney says. People nearing retirement also are concerned about weighing their families down with financial issues related to declining health, not being able to care for themselves and outliving their money, she adds.

Their adult children are worried, too. In addition to putting money away for their kids' education, saving for their own retirement or simply meeting expenses, these family members could potentially find themselves responsible for their parents' debts. And despite their best intentions, many adult children simply can't care for an elderly parent's daily needs on their own — and it's not a certainty that Medicaid will cover the expenses of outside care.

So what's a retiree to do to avoid this mutually distressing outcome?

Plan ahead.

In light of current economic circumstances, John and others nearing retirement should regularly examine their financial situation and, as necessary, readjust their plans.

"The more you're prepared, the less likely you'll be a financial burden to your family," Delaney says. She offers these retirement planning tips that may help protect your adult children:

Discuss financial issues as a family. Because your children have the potential to be saddled with your debts, they deserve an honest appraisal of your financial situation.

Assess your plans for aging. Talk with a financial professional about options that can help you with costs such as long-term care insurance or income-producing investments.

Continue contributing to your organization's retirement plan. Take advantage of catch-up contributions if you see a shortfall in your retirement savings.

Evaluate your Social Security payout options. If you're able to wait a few years beyond basic eligibility for Social Security to start receiving benefits, you have the chance to increase your payment amount.

Use online planning tools to help learn more about your potential retirement income needs and possible options. Our retirement planning tool can be a good place to start.

John believes planning helps remove some of the uncertainty about what lies ahead.

"We really planned out our retirement," he says. "Once you figure out what you're going to need and how to attain it, looking at the future isn't so scary."

Stay healthy.

Health is a huge variable in retirement, and not taking steps to preserve it can prove a costly mistake for you and your family members.

"The only thing you cannot calculate is health," John says. As an investment in his future, he eats well, goes to the gym regularly and runs five miles a week.

Delaney also recommends having just one primary-care physician. That continuity of care potentially could help your doctor spot problems early when treatment may be more effective. Preventive care — such as annual screenings and routine tests — is another step that can pay big long-term dividends in keeping you healthy.

Prepare for the unexpected.

To reduce your chances of becoming a burden to your family, Delaney says the key is taking time to think about what the future may hold well before it arrives. Doing that one thing may even help you prepare for the unexpected. "Be sure you have enough assets to maintain the lifestyle you want," she says. "That's the biggest step."

Planning can help you and your family feel more at ease about the future.

Barbara Delaney and StoneStreet Equity, LLC are not an affiliate of any company of the Principal Financial Group®.

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered, and is provided with the understanding that none of the member companies of The Principal are rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements.

Insurance products and plan administrative services are provided by Principal Life Insurance Company, a member of the Principal Financial Group® (The Principal®), Des Moines, IA 50392.